One of the most commonly asked questions for young businesses is when a CFO should be hired. Every company is different, but for many startup companies, there’s no need to hire a CFO until the company is considering going public. The alternative option is to work with an outsourced CFO.
Hiring an Outsourced CFO
A CFO, or chief financial officer, handles all things related to your company’s finances. Typically, a CFO overseas concrete issues like keeping accurate finances and preparing for tax season. CFOs will also keep track of the company’s well-being and ensure that you are on track to hit your financial goals. A CFO’s major tasks include helping build a budget, creating financial forecasts, guiding plans for future growth, and making recommendations to improve financial position.
While a larger company may want to have a CFO on staff, a smaller company or a startup business might consider having an outsourced CFO. The benefits of outsourcing a CFO are that the CFO is hired on a contract basis, is cheaper than having someone on staff, and may also have more experience to help a startup company thrive.
However, there are two things that you should not relinquish to your outsourced CFO. The CFO should not handle your fundraising or your bookkeeping. Your CFO can assist with your fundraising preparation, but meeting with potential investors should be left up to the owner or founder of the business. For bookkeeping, a CFO is overqualified for the task, and it would be a waste of money to request the CFO to do day-to-day bookkeeping and accounting jobs.
Eventually, every company will need a CFO, but if you are just starting or have a small business, outsourcing a CFO has many benefits. Having an outsourced CFO can help you keep your startup costs down while still accessing the benefit of a professional financial officer who can help you stay on track to meet your financial goals. Even with an outsourced CFO, however, the business founder should always handle their own fundraising and bookkeeping.